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Economic Collapse Is Erupting All Over The Planet As Global Leaders Begin To Panic

Earth Ready To Explode - Public DomainMainstream news outlets are already starting to use the phrase “economic collapse” to describe what is going on in some areas of our world right now.  For many Americans this may seem a bit strange, but the truth is that the worldwide economic slowdown that began during the second half of last year is starting to get a lot worse.  In this article, we are going to examine evidence of this from South America, Europe, Asia and North America.  Once we are done, it should be obvious that there is absolutely no reason to be optimistic about the direction of the global economy right now.  The warnings of so many prominent experts are now becoming a reality, and what we have witnessed so far are just the early chapters of a crushing economic crisis that will affect every man, woman and child in the entire world.

Let’s start with Brazil.  It has the 7th largest economy on the entire planet, and it is already enduring its worst recession in 25 years.  In fact, at the end of last year Goldman Sachs said that what was going on down there was actually a “depression“.

But now the crisis in Brazil has escalated significantly.

I want to share with you an excerpt from a recent article entitled “Brazil: Economic collapse worse than feared“.  I know, that title sounds like it comes directly from The Economic Collapse Blog, but I didn’t write it.

It actually comes from CNN

Amid political chaos, Brazil’s economic collapse is worse than its government once believed.

In the midst of rising calls to impeach President Dilma Rousseff, Brazil’s central bank announced Thursday that it now expects the country’s economy to shrink 3.5% this year.

That’s worse than the central bank’s previous estimate for a 1.9% contraction. The darker forecast matches what the International Monetary Fund projected for Brazil — Latin America’s largest country — and what many independent economists have suspected.

It is one thing for Michael Snyder to tell you that Brazil is in the midst of “economic collapse”, but it is another thing entirely for CNN to say it.

And of course I have been warning about the crisis down in Brazil for quite some time now.  For much more on this, please see my previous article entitled “The Economic Collapse Of South America Is Well Underway“.

Meanwhile, things are actually much worse in Venezuela than they are in Brazil.  Food and basic supplies are in short supply, the inflation rate has hit 720 percent, and crime is completely out of control.

The following is from an article in the Independent entitled “Venezuela is on the brink of complete economic collapse“…

The only question now is whether Venezuela’s government or economy will completely collapse first.

The key word there is “completely.” Both are well into their death throes. Indeed, Venezuela’s ruling party just lost congressional elections that gave the opposition a veto-proof majority, and it’s hard to see that getting any better for them any time soon — or ever.

Incumbents, after all, don’t tend to do too well when, according to the International Monetary Fund, their economy shrinks 10 percent one year, an additional 6 percent the next, and inflation explodes to 720 percent. It’s no wonder, then, that markets expect Venezuela to default on its debt in the very near future. The country is basically bankrupt.

Once again we see a very respected mainstream publication using the phrase “economic collapse” to describe what is happening in South America.

You can find some stunning video of the “economic Armageddon” that is taking place in Venezuela right here.  I would encourage you to watch that video, because what is happening down there will eventually be happening here.

Meanwhile, over in Europe the collapse of the Italian banking system has entered a disturbing new chapter.  Italy’s finance minister has called a meeting in Rome for Monday that will be focusing on a “last resort” bailout plan for the troubled banks…

Finance minister Pier Carlo Padoan has called a meeting in Rome on Monday with executives from Italy’s largest financial institutions to agree final details of a “last resort” bailout plan.

Yet on the eve of that gathering, concerns remain as to whether the plan will be sufficient to ringfence the weakest of Italy’s large banks, Monte dei Paschi di Siena, from contagion, according to people involved in the talks.

Italian bank shares have lost almost half their value so far this year amid investor worries over a €360bn pile of non-performing loans — equivalent to about a fifth of GDP. Lenders’ profitability has been hit by a crippling three-year recession.

As Italy descends into financial chaos, the rest of the continent better be paying attention.

Do you remember how hard it was for the rest of Europe to rescue Greece?

Well, Greece has the 44th largest economy on the planet.

Italy has the 8th.

It would be hard to overstate the seriousness of what is going on over in Europe, and it is not just Italy we are talking about.  All over the continent major banks are in deep trouble, and the chairman of France’s second largest  retail bank recently told reporters that “I am much more worried than I was in 2009“.

And there is very good reason for concern.  On Sunday, we learned that a major “bail-in” had just been announced for one of Austria’s most prominent banks.  The following comes from Zero Hedge

And then today, following a decision by the Austrian Banking Regulator, the Finanzmarktaufsicht or Financial Market Authority, Austria officially became the first European country to use a new law under the framework imposed by Bank the European Recovery and Resolution Directive to share losses of a failed bank with senior creditors as it slashed the value of debt owed by Heta Asset Resolution AG.

The highlights from the announcement:

Today, the Austrian Financial Market Authority (FMA) in its function as the resolution authority pursuant to the Bank Recovery and Resolution Act (BaSAG – Bundesgesetz über die Sanierung und Abwicklung von Banken) has issued the key features for the further steps for the resolution of HETA ASSET RESOLUTION AG. The most significant measures are:

  • a 100% bail-in for all subordinated liabilities,
  • a 53.98% bail-in, resulting in a 46.02% quota, for all eligible preferential liabilities,
  • the cancellation of all interest payments from 01.03.2015, when HETA was placed into resolution pursuant to BaSAG,
  • as well as a harmonisation of the maturities of all eligible liabilities to 31.12.2023.

According to the current resolution plan for HETA, the wind-down process should be concluded by 2020, although the repayment of all claims as well as the legally binding conclusion of all currently outstanding legal disputes will realistically only be concluded by the end of 2023. Only at that point will it be possible to finally distribute the assets and to liquidate the company.

The dominoes are starting to fall in Europe, and I would expect even bigger announcements in the weeks and months to come.

Over in Asia, economic chaos is beginning to prevail as well.

In China, the stock market is already down more than 40 percent from the peak, Chinese exports were down 25.4 percent on a year over year basis in February, and Chinese economic numbers overall have not been this poor since the depths of the last global recession.

At the same time, the Japanese economy is really struggling right now.  As I wrote about the other day, Japanese GDP has shrunk for two out of the last three quarters, we just saw Japanese industrial production experience the biggest one month decline that we have witnessed since the tsunami of 2011, and business sentiment has fallen to a three year low.  The Nikkei has dropped by about 5,000 points from where it was last summer, and some analysts believe that Japanese markets “are being destroyed” due to massive intervention by the Bank of Japan.

Here in the United States, we haven’t been hit quite as hard as the rest of the world just yet, but there are lots of very disturbing warning signs all around us.

At the end of last week, we learned that it is being projected that U.S. GDP will have grown by just 0.1 or 0.2 percent during the first quarter of 2016.  And on Monday corporate earnings reporting season begins, and it is expected to be a very, very bad one.  The following comes from Business Insider

We are about to get confirmation that earnings growth for America’s biggest companies was negative in the first quarter, compared to the same period a year ago.

When aluminum giant Alcoa releases its results on Monday, it will mark the unofficial start of the heaviest reporting season for S&P 500 companies.

The final scoreboard is expected to show a 9.1% earnings drop for the quarter, according to FactSet senior earnings analyst John Butters.

If these projections turn out to be accurate, it will be the fourth quarter in a row of earnings declines.  This is something that we never see outside of a recession.

And for a whole bunch more numbers which indicate that the U.S. economy is in very serious trouble, please see my previous article entitled “19 Facts That Prove Things In America Are Worse Than They Were Six Months Ago“.

Of course I am just another voice in the crowd when it comes to predicting that the U.S. economy is headed for rough times.  For example, just check out what Societe Generale economist Albert Edwards is saying

A tidal wave is coming to the US economy, according to Albert Edwards, and when it crashes it’s going to throw the economy into recession.

…the profit recession facing American corporations is going to lead to a collapse in corporate credit.

“Despite risk assets enjoying a few weeks in the sun our fail-safe recession indicator has stopped flashing amber and turned to red”

He continued:

Whole economy profits never normally fall this deeply without a recession unfolding. And with the US corporate sector up to its eyes in debt, the one asset class to be avoided — even more so than the ridiculously overvalued equity market — is US corporate debt. The economy will surely be swept away by a tidal wave of corporate default.

As you can see, it isn’t just one nation or one region of the world that we need to be concerned about.

Economic chaos is erupting literally all over the planet, and global leaders are starting to panic.

Unfortunately, they have had seven years to try to fix things since the last global recession, and they didn’t get the job done.  Anyone that believes that by some miracle they will be able to pull us out of the fire this time and that everything will somehow be okay is simply engaged in wishful thinking.

*About the author: Michael Snyder is the founder and publisher of The Economic Collapse Blog. Michael’s controversial new book about Bible prophecy entitled “The Rapture Verdict” is available in paperback and for the Kindle on Amazon.com.*

 

The World Is Now $217,000,000,000,000 In Debt And The Global Elite Like It That Way

The borrower is the servant of the lender, and through the mechanism of government debt virtually the entire planet has become the servants of the global money changers.  Politicians love to borrow money, but over time government debt slowly but surely impoverishes a nation.  As the elite get governments around the globe in increasing amounts of debt, those governments must raise taxes in order to keep servicing those debts.  In the end, it is all about taking money from us and transferring it into government pockets, and then taking money from government pockets and transferring it into the hands of the elite.  It is a game that has been going on for generations, and it is time for humanity to say that enough is enough.

According to the Institute of International Finance, global debt has now reached a new all-time record high of 217 trillion dollars

Global debt levels have surged to a record $217 trillion in the first quarter of the year. This is 327 percent of the world’s annual economic output (GDP), reports the Institute of International Finance (IIF).

The surging debt was driven by emerging economies, which have increased borrowing by $3 trillion to $56 trillion. This amounts to 218 percent of their combined economic output, five percentage points greater year on year.

Never before in human history has our world been so saturated with debt.

And what all of this debt does is that it funnels wealth to the very top of the global wealth pyramid.  In other words, it makes global wealth inequality far worse because this system is designed to make the rich even richer and the poor even poorer.

Every year the gap between the wealthy and the poor grows, and it has gotten to the point that eight men have as much wealth as the poorest 3.6 billion people on this planet combined

Eight men own the same wealth as the 3.6 billion people who make up the poorest half of humanity, according to a new report published by Oxfam today to mark the annual meeting of political and business leaders in Davos.

This didn’t happen by accident.  Sadly, most people don’t even understand that this is literally what our system was designed to do.

Today, more than 99 percent of the population of the planet lives in a country that has a central bank.  And debt-based central banking is designed to get national governments trapped in endless debt spirals from which they can never possibly escape.

For example, just consider the Federal Reserve.  During the four decades before the Federal Reserve was created, our country enjoyed the best period of economic growth in U.S. history.  But since the Fed was established in 1913, the value of the U.S. dollar has fallen by approximately 98 percent and the size of our national debt has gotten more than 5000 times larger.

It isn’t an accident that we are 20 trillion dollars in debt.  The truth is that the debt-based Federal Reserve is doing exactly what it was originally designed to do.  And no matter what politicians will tell you, we will never have a permanent solution to our debt problem until we get rid of the Federal Reserve.

In 2017, interest on the national debt will be nearly half a trillion dollars.

That means that close to 500 billion of our tax dollars will go out the door before our government spends a single penny on the military, on roads, on health care or on anything else.

And we continue to pile up debt at a rate of more than 100 million dollars an hour.  According to the Congressional Budget Office, the federal government will add more than a trillion dollars to the national debt once again in 2018…

Unless current laws are changed, federal individual income tax collections will increase by 9.5 percent in fiscal 2018, which begins on Oct. 1, according to data released today by the Congressional Budget Office.

At the same time, however, the federal debt will increase by more than $1 trillion.

We shouldn’t be doing this, but we just can’t seem to stop.

Let me try to put this into perspective.  If you could somehow borrow a million dollars today and obligate your children to pay it off for you, would you do it?

Maybe if you really hate your children you would, but most loving parents would never do such a thing.

But that is precisely what we are doing on a national level.

Thomas Jefferson was strongly against government debt because he believed that it was a way for one generation to steal from another generation.  And he actually wished that he could have added another amendment to the U.S. Constitution which would have banned government borrowing…

“I wish it were possible to obtain a single amendment to our Constitution. I would be willing to depend on that alone for the reduction of the administration of our government to the genuine principles of its Constitution; I mean an additional article, taking from the federal government the power of borrowing.”

And the really big secret that none of us are supposed to know is that governments don’t actually have to borrow money.

But if we start saying that too loudly the people that are making trillions of dollars from the current system are going to get very, very upset with us.

Today, we are living in the terminal phase of the biggest debt bubble in the history of the planet.  Every debt bubble eventually ends tragically, and this one will too.

Bill Gross recently noted that “our highly levered financial system is like a truckload of nitro glycerin on a bumpy road”.  One wrong move and the whole thing could blow sky high.

When everything comes crashing down and a great crisis happens, we are going to have a choice.

We could try to rebuild the fundamentally flawed old system, or we could scrap it and start over with something much better.

My hope is that we will finally learn our lesson and discard the debt-based central banking model for good.

The reason why I am writing about this so much ahead of time is so that people will actually understand why the coming crisis is happening as it unfolds.

If we can get everyone to understand how we are being systematically robbed and cheated, perhaps people will finally get mad enough to do something about it.

 

12 Signs The Economic Slowdown The Experts Have Been Warning About Is Now Here

Since the election there has been this perception among the American public that the economy is improving, but that has not been the case at all.  U.S. GDP growth for the first quarter was just revised up to 1.2 percent, but that is even lower than the average growth of just 1.33 percent that we saw over the previous ten years.  But when you look even deeper into the numbers a much more alarming picture emerges.  Commercial and industrial loan growth is declining, auto loan defaults are rising, bankruptcies are absolutely surging and we are on pace to break the all-time record for most store closings in a single year in the United States by more than 20 percent.  All of these are points that I have covered before, but today I have 12 new facts to share with you.  The following are 12 signs that the economic slowdown that the experts have been warning about is now here…

#1 According to Challenger, the number of job cuts in May was 71 percent higher than it was in May 2016.

#2 We just witnessed the third worst drop in U.S. construction spending in the last six years.

#3 U.S. manufacturing PMI fell to an 8 month low in May.

#4 Financial stocks have lost all of their gains for the year, and some analysts are saying that this is “a terrible sign”.

#5 One new survey has found that 39 percent of all millionaires “plan to avoid investing in the coming month”.  That is the highest that figure has been since December 2013.

#6 Jobless claims just shot up to a five week high of 248,000.

#7 General Motors just reported another sales decline in May, and it is being reported that the company may be preparing for “more job cuts at its American factories”.

#8 After an initial bump after Donald Trump’s surprise election victory, U.S. consumer confidence is starting to fall.

#9 Since Memorial Day, Radio Shack has officially shut down more than 1,000 stores.

#10 Payless has just increased the number of stores that it plans to close to about 800.

#11 According to the Los Angeles Times, it is being projected that 25 percent of all shopping malls in the United States may close within the next five years.

#12 Over the past 12 months, the number of homeless people living in Los Angeles County has risen by a  staggering 23 percent.

And in case those numbers have not persuaded you that the U.S. economy is heading for rough times, I would encourage you to go check out my previous article entitled “11 Facts That Prove That The U.S. Economy In 2017 Is In Far Worse Shape Than It Was In 2016” for even more eye-popping statistics.

During a bubble, it can feel like the good times are just going to keep rolling forever.

But that never actually happens in reality.

The truth is that we are in the terminal phase of the greatest debt bubble of all time, and the evidence is starting to mount that this debt bubble has just about run its course.  The following comes from Zero Hedge

A recurring theme on this website has been to periodically highlight the tremendous build up in US corporate debt, most recently in April when we showed that “Corporate Debt To EBITDA Hits All Time High.” The relentless debt build up is something which even the IMF recently noted, when in April it released a special report on financial stability, according to which 20% of US corporations were at risk of default should rates rise. It is also the topic of the latest piece by SocGen’s strategist Andrew Lapthorne who uses even more colorful adjectives to describe what has happened since the financial crisis, noting that “the debt build-up during this cycle has been incredible, particularly when compared to the stagnant progression of EBITDA.”

Lapthorne calculates that S&P1500 ex financial net debt has risen by almost $2 trillion in five years, a 150% increase, but this mild in comparison to the tripling of the debt pile in the Russell 2000 in six years. He also notes, as shown he previously, that as a result of this debt surge, interest payments cost the smallest 50% of stocks in the US fully 30% of their EBIT compared with just 10% of profits for the largest 10% and states that “clearly the sensitivity to higher interest rates is then going to be with this smallest 50%, while the dominance and financial strength of the largest 10% disguises this problem in the aggregate index measures.”

The same report noted that net debt growth in the U.S. is quickly headed toward negative territory, and the last time that happened was during the last recession.

We see similar things when we look at the 2nd largest economy on the entire planet.  According to Jim Rickards, China “has multiple bubbles, and they’re all getting ready to burst”…

China is in the greatest financial bubble in history. Yet, calling China a bubble does not do justice to the situation. This story has been touched on periodically over the last year.

China has multiple bubbles, and they’re all getting ready to burst. If you make the right moves now, you could be well positioned even as Chinese credit and currency crash and burn.

The first and most obvious bubble is credit. The combined Chinese government and corporate debt-to-equity ratio is over 300-to-1 after hidden liabilities, such as provincial guarantees and shadow banking system liabilities, are taken into account.

We just got the worst Chinese manufacturing number in about a year, and it looks like economic conditions over there are really starting to slow down as well.

Just like 2008, the coming crisis is going to be truly global in scope.

It is funny how our perspective colors our reality.  Just like in 2007, many are mocking those that are warning that a crisis is coming, but just like in 2009, after the crisis strikes many will be complaining that nobody warned them in advance about what was ahead.

And at this moment it may seem like we have all the time in the world to get prepared for the approaching storm, but once it is here people will be talking about how it seemed to hit us so quickly.

My hope is that many Americans will finally be fed up with our fundamentally flawed financial system once they realize that we are facing another horrendous economic crisis, and that in the aftermath they will finally be ready for the dramatic solutions that are necessary in order to permanently fix things.

 

Global Collapse: Children Are Literally Starving To Death In Venezuela And Yemen

Venezuela and Yemen were both once very prosperous nations, but now parents are literally watching their children starve to death as the economies of both nations continue to utterly collapse.  Just like so many here in the United States, most of those living in Venezuela and Yemen would have called you completely crazy if you would have warned them that this was going to happen five years ago.  In particular, Venezuela has more proven oil reserves than almost anyone else on the planet, and so to most of their citizens it was unimaginable that things could ever get this bad.  But it has happened, and the collapse that has already begun in parts of South America, Africa and the Middle East will soon spread elsewhere.

When I said that children are literally starving to death in Venezuela, I was not exaggerating one bit.  The following comes from the Wall Street Journal

Jean Pierre Planchart, a year old, has the drawn face of an old man and a cry that is little more than a whimper. His ribs show through his skin. He weighs just 11 pounds.

His mother, Maria Planchart, tried to feed him what she could find combing through the trash—scraps of chicken or potato. She finally took him to a hospital in Caracas, where she prays a rice-milk concoction keeps her son alive.

“I watched him sleep and sleep, getting weaker, all the time losing weight,” said Ms. Planchart, 34 years old. “I never thought I’d see Venezuela like this.”

What would you do if that was your child?

At one time Venezuela had the brightest outlook out of all the economies in South America, but now their economy has contracted by a total of 27 percent since 2013, imports of food have fallen 70 percent, and the IMF says that the inflation rate will hit a staggering 720 percent this year.

Tonight, in major cities all across Venezuela you will find thousands of people rummaging through garbage looking for food.  It has been reported that some citizens have even resorted to eating cats, dogs and pigeons because they are so desperate for something to eat.

According to one survey, among those that said that they lost weight last year, the average amount lost was a staggering 19 pounds.  In the United States that would be a good thing, but in a country like Venezuela that is an absolutely catastrophic number.

Meanwhile, thousands of children are starving to death in Yemen as well

Eyes half open and sunken deep into their sockets, little Jamila Ali Abdu already looked half dead for most of her 12-day stay at the Hodeidah clinic.

Too weak to resist the march of disease and hunger in her war-battered country, the child’s tiny frame was swathed in a bright green shroud and lowered by sobbing relatives into a dusty grave on Tuesday.

The primary cause of the crisis in Yemen is a nightmarish civil war that is not going to end any time soon.

And most Americans don’t realize this, but the U.S. military has contributed to the civil war by conducting airstrikes.  It is essentially a proxy war between Saudi Arabia and Iran, and both sides are absolutely determined to win.

So the suffering in Yemen is only going to intensify, and already a child under the age of five is dying every five minutes

The United Nations warns that a child under five in Yemen dies around every 10 minutes from preventable causes such as starvation, disease, poor sanitation or lack of medical care.

UN chief Antonio Guterres warned last week of “the starving and the crippling of an entire generation.”

Nearly 17 million of Yemen’s 28 million people are deemed “food insecure” by aid groups – and around SEVEN MILLION do not know where they will get their next meal.

Even though you may not believe it right now, what is happening in Venezuela and Yemen is going to happen in the United States someday as well.

So instead of using this time of relative stability for the U.S. economy to party, I would be using it to prepare.

The Worst Retail Cataclysm Ever: Sears Warns It Is On The Verge Of Collapse As Payless Prepares To File For Bankruptcy

Alarm Clock Abstract - Public DomainMore than 3,500 retail stores are going to close all across America over the next few months as the worst retail downturn in U.S. history gets even deeper.  Earlier this week, Sears shocked the world when it announced that there is “substantial doubt” that the company will be able to “continue as a going concern” much longer.  In other words, Sears has announced that it is on the verge of imminent collapse.  Meanwhile, Payless stunned the retail industry when it came out that they are preparing to file for bankruptcy.  The “retail apocalypse” that I have been warning about is greatly accelerating, and many believe that this is one of the early warning signs that the economic collapse that is already going on in other parts of the globe will soon reach U.S. shores.

I have repeatedly warned my readers that “Sears is going to zero“, and now Sears is officially saying that it might actually happen.  When you file official paperwork with the government that says there is “substantial doubt” that the company will survive, that means that the end is very near

The company that operates Sears, the department store chain that dominated retail for decades, warned Tuesday that it faces “substantial doubt” about its ability to stay in business unless it can borrow more and tap cash from more of its assets.

“Our historical operating results indicate substantial doubt exists related to the company’s ability to continue as a going concern,” Sears Holdings said in a filing with the Securities and Exchange Commission. Sears Holdings operates both Sears and Kmart stores.

In the wake of that statement, the price of Sears stock dipped 13.69% to $7.85 a share.

Personally, I am going to miss Sears very much.  But of course the truth is that they simply cannot continue operating as they have been.

For the quarter that ended on January 28th, Sears lost an astounding 607 million dollars

The company said it lost $607 million, or $5.67 per diluted share, during the quarter that ended on Jan. 28. That compared with a loss of $580 million, or $5.44 per diluted share, a year earlier. It has posted a loss in all but two of the last 24 quarters, according to S&P Global Market Intelligence.

How in the world is it possible for a retailer to lose that amount of money in just three months?

As I have said before, if they had employees flushing dollar bills down the toilet 24 hours a day they still shouldn’t have losses that big.

This week we also learned that Payless is heading for bankruptcy.  According to Bloomberg, the chain is planning to imminently close at least 400 stores…

Payless Inc., the struggling discount shoe chain, is preparing to file for bankruptcy as soon as next week, according to people familiar with the matter.

The company is initially planning to close 400 to 500 stores as it reorganizes operations, said the people, who asked not to be identified because the deliberations aren’t public. Payless had originally looked to shutter as many as 1,000 locations, and the number may still be in flux, according to one of the people.

Of course these are just two examples of a much broader phenomenon.

Never before in U.S. history have we seen such a dramatic wave of store closures.  According to Business Insider, over 3,500 retail locations “are expected to close in the next couple of months”…

Thousands of mall-based stores are shutting down in what’s fast becoming one of the biggest waves of retail closures in decades.

More than 3,500 stores are expected to close in the next couple of months.

Once thriving shopping malls are rapidly being transformed into ghost towns.  As I wrote about just recently, “you might be tempted to think that ‘Space Available’ was the hottest new retail chain in the entire country.”

The demise of Sears is going to be an absolute nightmare for many mall owners.  Once “anchor stores” start closing, it is usually only a matter of time before smaller stores start bailing out

When an anchor store like Sears or Macy’s closes, it often triggers a downward spiral in performance for shopping malls.

Not only do the malls lose the income and shopper traffic from that store’s business, but the closure often triggers “co-tenancy clauses” that allow the other mall tenants to terminate their leases or renegotiate the terms, typically with a period of lower rents, until another retailer moves into the anchor space.

Years ago I wrote of a time when we would see boarded-up storefronts all across America, and now it is happening.

Instead of asking which retailers are going to close, perhaps we should be asking which ones are going to survive this retail cataclysm.

In the past, you could always count on middle class U.S. consumers to save the day, but today the middle class is steadily shrinking and U.S. consumers are increasingly tapped out.

For instance, just look at what is happening to delinquency rates on auto loans

US auto loan and lease credit loss rates weakened in the second half of 2016, according to a new report from Fitch Ratings, which said they will continue to deteriorate.

“Subprime credit losses are accelerating faster than the prime segment, and this trend is likely to continue as a result of looser underwriting standards by lenders in recent years,” said Michael Taiano, a director at Fitch.

The last time so many Americans got behind on subprime auto loans was during the last financial crisis.

We are seeing so many similarities to what happened just prior to the last recession, and yet most Americans still seem to think that the U.S. economy is going to be just fine in 2017.

Unfortunately, major red flags are popping up in the hard economic numbers and in the financial markets.

The last recession probably should have started back in late 2015, but thanks to manipulation by the Fed and an unprecedented debt binge by the Obama administration, official U.S. GDP growth has been able to stay barely above zero for the last year and a half.

But just because something is delayed does not mean that it is canceled.

All along, our long-term economic imbalances have continued to get even worse, and a date with destiny is rapidly approaching for the U.S. economy.

The Global Famine Begins: UN Announces That The Worst Food Crisis Since World War II Is Happening Right Now

Horse Famine - Public DomainWe always knew that this would start happening.  Earlier this month, I wrote about the severe economic problems that are plaguing South America, but up to this point I have neglected to discuss the horrific famines that are breaking out all over Africa.  Right now there is a desperate need for food in South Sudan, Somalia, northeast Nigeria, Eritrea and Kenya.  And Yemen, even though it is not technically part of Africa, is being affected by many of the same factors that are crippling nations all over eastern Africa.  The United Nations says that more than 20 million people could die from starvation and disease if nothing is done.  When I write about economic collapse, this is the kind of thing that I am talking about, and we are starting to see alarming conditions spread across the globe.  Many believe that we could never possibly face this kind of food crisis in the western world, but unfortunately wishful thinking will only get you so far.

The United Nations was formed in 1945, and the UN has just announced that what we are facing this year is “the largest humanitarian crisis since the creation of the UN”.  The following comes from a CNN article entitled “20 million at risk of starvation in world’s largest crisis since 1945, UN says“…

“We stand at a critical point in history. Already at the beginning of the year we are facing the largest humanitarian crisis since the creation of the UN,” UN humanitarian chief Stephen O’Brien said Friday.

Now, more than 20 million people across four countries face starvation and famine. Without collective and coordinated global efforts, people will simply starve to death. Many more will suffer and die from disease.”

It would be hard to overstate the level of human suffering that we are witnessing in many parts of Africa at this moment.  In Somalia, the UN estimates that more than 6 million people are in desperate need of food aid

As Somalia inches closer to a calamitous famine, the prospect of utter devastation and colossal loss of human life is once again becoming an imminent reality. The humanitarian situation in Somalia is deteriorating by the day with up to 6.2 million people in need of urgent aid. People across Somalia have been forced to walk hundreds of miles in search of food, water and shelter- with women and children disproportionately affected. Over 300,000 children under the age of five are severely malnourished, with over 200,000 more children at risk of acute malnutrition.

In South Sudan, close to half the population is in dire need of assistance, and things have gotten so bad there that people will literally eat grass if they can find it

Across South Sudan more than one million children are believed to be acutely malnourished and UNICEF have said that if urgent aid does not reach them, many of them will die. “There is no food, we eat anything we can find,” one South Sudanese mother told ITV. “We will find grass, we will eat it. That’s just the way it us for us now.”

Over in Yemen, there are about seven million people in need of food help, and authorities are warning that if nothing is done “millions of children” could starve to death

“The numbers affected are absolutely extraordinary,” said Mark Kaye, Save the Children’s Yemen spokesperson.

“We keep on talking about a country that’s on the brink of famine, but for me these numbers highlight that we’re at the point of no return. If things are not done now we are going to be looking back on this and millions of children will have starved to death, and we’ll all have been aware of this for some time. That will shame us as an international community for years to come.

Eritrea was not specifically included in the recent UN alert, but it should have been.  Much of the country has been hit by a crippling drought, and approximately half of all children in Eritrea are stunted

But we cannot understand why Eritrea is not included in the appeal. Unicef has confirmed what we know from our friends and families inside the country. In a report in January, the agency said that the El Niño drought has hit half of all Eritrea’s regions. Acute malnutrition is widespread. As Unicef put it: “Malnutrition rates already exceeded emergency levels, with 22,700 children under five projected to suffer from severe acute malnutrition in 2017 … Half of all children in Eritrea are stunted, and as a result, these children are even more vulnerable to malnutrition and disease outbreaks.

We have been warned that there would be famines in diverse places in these times.  But here in the western world we tend to be lulled into a false sense of security by our comfortable lives, not realizing that the massively inflated standard of living that we have been enjoying has been fueled by the largest mountain of debt in the history of the planet.

In Kenya, a national emergency has been declared due to drought and famine.  For those of you that are parents, what would you do if your children were crying out for food but you didn’t have anything to give them?  The following story from Kenya is beyond heartbreaking…

Emmanuel Ayapar is three years old and can no longer walk. The flesh on his legs, which dangle from his mother’s hip as she carries him around, is wasting away.

He seems listless and sad, tongue flicking repeatedly in and out of his mouth.

‘We do not have enough food,’ said Veronica, his 28-year-old mother. ‘We eat only once a day.’

The little boy is suffering from severe malnutrition and is at risk of starving to death. He weighs just 15lb – half the typical weight for a boy of his age.

I don’t even know what to say after that.

In the western world we can be so incredibly self-absorbed that we don’t even realize that children are literally starving to death on the other side of the planet.

Hopefully those of us that live in “wealthy” western countries will step up to the plate and aid those in need, and hopefully this crisis will also help us to understand that we need to prepare for the day when things get difficult in our own nations too.

12 Reasons Why The Federal Reserve May Have Just Made The Biggest Economic Mistake Since The Last Financial Crisis

Wrong Way Signs - Public DomainHas the Federal Reserve gone completely insane?  On Wednesday, the Fed raised interest rates for the second time in three months, and it signaled that more rate hikes are coming in the months ahead.  When the Federal Reserve lowers interest rates, it becomes less expensive to borrow money and that tends to stimulate more economic activity.  But when the Federal Reserve raises rates , that makes it more expensive to borrow money and that tends to slow down economic activity.  So why in the world is the Fed raising rates when the U.S. economy is already showing signs of slowing down dramatically?  The following are 12 reasons why the Federal Reserve may have just made the biggest economic mistake since the last financial crisis…

#1 Just hours before the Fed announced this rate hike, the Federal Reserve Bank of Atlanta’s projection for U.S. GDP growth in the first quarter fell to just 0.9 percent.  If that projection turns out to be accurate, this will be the weakest quarter of economic growth during which rates were hiked in 37 years.

#2 The flow of credit is more critical to our economy than ever before, and higher rates will mean higher interest payments on adjustable rate mortgages, auto loans and credit card debt.  Needless to say, this is going to slow the economy down substantially

The Federal Reserve decision Wednesday to lift its benchmark short-term interest rate by a quarter percentage point is likely to have a domino effect across the economy as it gradually pushes up rates for everything from mortgages and credit card rates to small business loans.

Consumers with credit card debt, adjustable-rate mortgages and home equity lines of credit are the most likely to be affected by a rate hike, says Greg McBride, chief analyst at Bankrate.com. He says it’s the cumulative effect that’s important, especially since the Fed already raised rates in December 2015 and December 2016.

#3 Speaking of auto loans, the number of people that are defaulting on them had already been rising even before this rate hike by the Fed…

The number of Americans who have stopped paying their car loans appears to be increasing — a development that has the potential to send ripple effects through the US economy.

Losses on subprime auto loans have spiked in the last few months, according to Steven Ricchiuto, Mizuho’s chief US economist. They jumped to 9.1% in January, up from 7.9% in January 2016.

“Recoveries on subprime auto loans also fell to just 34.8%, the worst performance in over seven years,” he said in a note.

#4 Higher rates will likely accelerate the ongoing “retail apocalypse“, and we just recently learned that department store sales are crashing “by the most on record“.

#5 We also recently learned that the number of “distressed retailers” in the United States is now at the highest level that we have seen since the last recession.

#6 We have just been through “the worst financial recovery in 65 years“, and now the Fed’s actions threaten to plunge us into a brand new crisis.

#7 U.S. consumers certainly aren’t thriving, and so an economic slowdown will hit many of them extremely hard.  In fact, about half of all Americans could not even write a $500 check for an unexpected emergency expense if they had to do so right now.

#8 The bond market is already crashing.  Most casual observers only watch stocks, but the truth is that a bond crash almost always comes before a stock market crash.  Bonds have been falling like a rock since Donald Trump’s election victory, and we are not too far away from a full-blown crisis.  If you follow my work on a regular basis you know this is a hot button issue for me, and if bonds continue to plummet I will be writing quite a bit about this in the weeks ahead.

#9 On top of everything else, we could soon be facing a new debt ceiling crisis.  The suspension of the debt ceiling has ended, and Donald Trump could have a very hard time finding the votes that he needs to raise it.  The following comes from Bloomberg

In particular, the markets seem to be ignoring two vital numbers, which together could have profound consequences for global markets: 218 and $189 billion. In order to raise or suspend the debt ceiling (which will technically be reinstated on March 16), 218 votes are needed in the House of Representatives. The Treasury’s cash balance will need to last until this happens, or the U.S. will default.

The opening cash balance this month was $189 billion, and Treasury is burning an average of $2 billion per day – with the ability to issue new debt. Net redemptions of existing debt not held by the government are running north of $100 billion a month. Treasury Secretary Steven Mnuchin has acknowledged the coming deadline, encouraging Congress last week to raise the limit immediately.

If something is not done soon, the federal government could be out of cash around the beginning of the summer, and this could create a political crisis of unprecedented proportions.

#10 And even if the debt ceiling is raised, that does not mean that everything is okay.  It is being reported that U.S. government revenues just experienced their largest decline since the last financial crisis.

#11 What do corporate insiders know that the rest of us do not?  Stock purchases by corporate insiders are at the lowest level that we have seen in three decades

It’s usually a good sign when the CEO of a major company is buying shares; s/he is an insider and knows what’s going on, so their confidence is a positive sign.

Well, according to public data filed with the Securities and Exchange Commission, insider buying is at its LOWEST level in THREE DECADES.

In other words, the people at the top of the corporate food chain who have privileged information about their businesses are NOT buying.

#12 A survey that was just released found that corporate executives are extremely concerned that Donald Trump’s policies could trigger a trade war

As business leaders are nearly split over the effectiveness of Washington’s new leadership, they are in unison when it comes to fears over trade and immigration. Nearly all CFOs surveyed are concerned that the Trump administration’s policies could trigger a trade war between the United States and China.

A decline in global trade could deepen the economic downturns that are already going on all over the planet.  For example, Brazil is already experiencing “its longest and deepest recession in recorded history“, and right next door people are literally starving in Venezuela.

After everything that you just read, would you say that the economy is “doing well”?

Of course not.

But after raising rates on Wednesday, that is precisely what Federal Reserve Chair Janet Yellen told the press

“The simple message is — the economy is doing well.” Federal Reserve Chair Janet Yellen said at a news conference. “The unemployment rate has moved way down and many more people are feeling more optimistic about their labor prospects.”

However, after she was challenged with some hard economic data by a reporter, Yellen seemed to change her tune somewhat

Well, look, our policy is not set in stone. It is data- dependent and we’re — we’re not locked into any particular policy path. Our — you know, as you said, the data have not notably strengthened. I — there’s noise always in the data from quarter to quarter. But we haven’t changed our view of the outlook. We think we’re on the same path, not — we haven’t boosted the outlook, projected faster growth. We think we’re moving along the same course we’ve been on, but it is one that involves gradual tightening in the labor market.

Just like in 2008, the Federal Reserve really doesn’t understand the economic environment.  At that time, Federal Reserve Chair Ben Bernanke assured everyone that there was not going to be a recession, but when he made that statement a recession was actually already underway.

And as I have said before, I wouldn’t be surprised in the least if it is ultimately announced that GDP growth for the first quarter of 2017 was negative.

Whether it happens now or a bit later, the truth is that the U.S. economy is heading for a new recession, and the Federal Reserve has just given us a major shove in that direction.

Is the Fed really so clueless about the true state of the economy, or could it be possible that they are raising rates just to hurt Donald Trump?

I don’t know the answer to that question, but clearly something very strange is going on…

$21,714 For Every Man, Woman And Child In The World – This Global Debt Bomb Is Ready To Explode

Debt Bomb Globe - Public DomainAccording to the International Monetary Fund, global debt has grown to a staggering grand total of 152 trillion dollars.  Other estimates put that figure closer to 200 trillion dollars, but for the purposes of this article let’s use the more conservative number.  If you take 152 trillion dollars and divide it by the seven billion people living on the planet, you get $21,714, which would be the share of that debt for every man, woman and child in the world if it was divided up equally.

So if you have a family of four, your family’s share of the global debt load would be $86,856.

Very few families could write a check for that amount today, and we also must remember that we live in some of the wealthiest areas on the globe.  Considering the fact that more than 3 billion people around the world live on two dollars a day or less, the truth is that about half the planet would not be capable of contributing toward the repayment of our 152 trillion dollar debt at all.  So they should probably be excluded from these calculations entirely, and that would mean that your family’s share of the debt would ultimately be far, far higher.

Of course global debt repayment will never actually be apportioned by family.  The reason why I am sharing this example is to show you that it is literally impossible for all of this debt to ever be repaid.

We are living during the greatest debt bubble in the history of the world, and our financial engineers have got to keep figuring out ways to keep it growing much faster than global GDP because if it ever stops growing it will burst and destroy the entire global financial system.

Bill Gross, one of the most highly respected financial minds on the entire planet, recently observed that “our highly levered financial system is like a truckload of nitro glycerin on a bumpy road”.

And he is precisely correct.  Everything might seem fine for a while, but one day we are going to hit the wrong bump at the wrong time and the whole thing is going to go KA-BOOM.

The financial crisis of 2008 represented an opportunity to learn from our mistakes, but instead we just papered over our errors and cranked up the global debt creation machine to levels never seen before.  Here is more from Bill Gross

My lesson continued but the crux of it was that in 2017, the global economy has created more credit relative to GDP than that at the beginning of 2008’s disaster. In the U.S., credit of $65 trillion is roughly 350% of annual GDP and the ratio is rising. In China, the ratio has more than doubled in the past decade to nearly 300%. Since 2007, China has added $24 trillion worth of debt to its collective balance sheet. Over the same period, the U.S. and Europe only added $12 trillion each. Capitalism, with its adopted fractional reserve banking system, depends on credit expansion and the printing of additional reserves by central banks, which in turn are re-lent by private banks to create pizza stores, cell phones and a myriad of other products and business enterprises. But the credit creation has limits and the cost of credit (interest rates) must be carefully monitored so that borrowers (think subprime) can pay back the monthly servicing costs. If rates are too high (and credit as a % of GDP too high as well), then potential Lehman black swans can occur. On the other hand, if rates are too low (and credit as a % of GDP declines), then the system breaks down, as savers, pension funds and insurance companies become unable to earn a rate of return high enough to match and service their liabilities.

There is always a price to be paid for going into debt.  It mystifies me that so many Americans seem to not understand this very basic principle.

On an individual level, you could live like a Trump (at least for a while) by getting a whole bunch of credit cards and maxing all of them out.

But eventually a day of reckoning would come.

The same thing happens on a national level.  In recent years we have seen examples in Greece, Cyprus, Zimbabwe, Venezuela and various other European nations.

Here in the United States, more than 9 trillion dollars was added to the national debt during the Obama years.  If we had not taken more than 9 trillion dollars of consumption and brought it into the present, we would most assuredly be in the midst of an epic economic depression right now.

Instead of taking our pain in the short-term, we have sold future generations of Americans as debt slaves, and if they get the chance someday they will look back and curse us for what we have done to them.

Many believe that Donald Trump can make short-term economic conditions even better than Obama did, but how in the world is he going to do that?

Is he going to borrow another 9 trillion dollars?

A big test is coming up.  A while back, Barack Obama and the Republican Congress colluded to suspend the debt ceiling until March 15th, 2017, and this week we are going to hit that deadline.

The U.S. Treasury will be able to implement “emergency measures” for a while, but if the debt ceiling is not raised the U.S. government will not be able to borrow more money and will run out of cash very quickly.  The following comes from David Stockman

The Treasury will likely be out of cash shortly after Memorial Day. That is, the White House will be in the mother of all debt ceiling battles before the Donald and his team even see it coming.

With just $66 billion on hand it is now going to run out of cash before even the bloody battle over Obamacare Lite now underway in the House has been completed. That means that there will not be even a glimmer of hope for the vaunted Trump tax cut stimulus and economic rebound on the horizon.

Trump is going to find it quite challenging to find the votes to raise the debt ceiling.  After everything that has happened, very few Democrats are willing to help Trump with anything, and many Republicans are absolutely against raising the debt ceiling without major spending cut concessions.

So we shall see what happens.

If the debt ceiling is not raised, it will almost certainly mean that a major political crisis and a severe economic downturn are imminent.

But if the debt ceiling is raised, it will mean that Donald Trump and the Republicans in Congress are willingly complicit in the destruction of this country’s long-term economic future.

When you go into debt there are consequences.

And when the greatest debt bubble in human history finally bursts, the consequences will be exceedingly severe.

The best that our leaders can do for now is to keep the bubble alive for as long as possible, because what comes after the bubble is gone will be absolutely unthinkable.

Global Leaders Rattle Their Sabers As The World Marches Toward War

The World Marches Toward War - Public DomainIran just conducted another provocative missile test, more U.S. troops are being sent to the Middle East, it was just announced that the U.S. military will be sending B-1 and B-52 bombers to South Korea in response to North Korea firing four missiles into the seas near Japan, and China is absolutely livid that a U.S. carrier group just sailed through contested waters in the South China Sea.  We have entered a season where leaders all over the globe feel a need to rattle their sabers, and many fear that this could be leading us to war.  In particular, Donald Trump is going to be under the microscope in the days ahead as other world leaders test his resolve.  Will Trump be able to show that he is tough without going over the edge and starting an actual conflict?

The Iranians made global headlines on Thursday when they conducted yet another ballistic missile test despite being warned by Trump on numerous occasions…

As tensions between the U.S. and Iran continue to mount, the semi-official news agency Tasnim is reporting that Iran’s Revolutionary Guard has successfully conducted yet another ballistic missile test, this time from a navy vessel.  Called the Hormuz 2, these latest missiles are designed to destroy moving targets at sea at ranges up to 300 km (180 miles).

Reports on the latest test quotes Amir Ali Hajizadeh, commander of the IRGC’s Aerospace Force, who confirmed that “the naval ballistic missile called Hormuz 2 successfully destroyed a target which was 250 km away.”

The missile test is the latest event in a long-running rivalry between Iran and the United States in and around the Strait of Hormuz, which guards the entrance to the Gulf. About 20% of the world’s oil passes through the waterway, which is less than 40 km wide at its narrowest point.

So how will Trump respond to this provocation?

Will he escalate the situation?  If he does nothing he will look weak, but if he goes too far he could risk open conflict.

Elsewhere in the Middle East, things are already escalating.  It is being reported that “several hundred Marines” are on the ground in Syria to support an assault on the city of Raqqa, and another 1,000 troops could be sent to Kuwait to join the fight against ISIS any day now.  The following comes from Zero Hedge

While the Trump administration waits to decide if it will send 1,000 troops to Kuwait to fight ISIS, overnight the Washington Post reported that the US has sent several hundred Marines to Syria to support an allied local force aiming to capture the Islamic State stronghold of Raqqa. Defence officials said they would establish an outpost from which they could fire artillery at IS positions some 32km (20 miles) away. US special forces are already on the ground, “advising” the Kurdish-led Syrian Democratic Forces (SDF) alliance according to the BBC.

The defence officials told the Washington Post that the Marines were from the San Diego-based 11th Marine Expeditionary Unit, and that they had flown to northern Syria via Djibouti and Kuwait. They are to set up an artillery battery that could fire powerful 155mm shells from M777 howitzers, the officials said. Another marine expeditionary unit carried out a similar mission at the start of the Iraqi government’s operation to recapture the city of Mosul from IS last year.

Meanwhile, China is spitting mad for several reasons.  For one, the Chinese are absolutely furious that South Korea has allowed the U.S. to deploy the THAAD missile defense system on their soil…

China is lashing out at South Korea and Washington for the deployment of a powerful missile defense system known as the Terminal High Altitude Area Defense system, or THAAD, deposited at the Osan Air Base in South Korea on Monday evening.

The deployment of THAAD follows several ballistic missile tests by North Korea in recent months, including the launch of four missiles on Monday, three of which landed in the sea off the coast of Japan. Though THAAD would help South Korea protect itself from a North Korean missile attack, China is vocally protesting the deployment of the system, claiming it upsets the “strategic equilibrium” in the region because its radar will allow the United States to detect and track missiles launched from China.

Of course the U.S. needed to do something, because the North Koreans keep rattling their sabers by firing off more ballistic missiles toward Japan.

But it is one thing to deploy a missile defense system, and it is another thing entirely to fly strategic nuclear bombers into the region.

So if the Chinese were upset when THAAD was deployed, how will they feel when B-1 and B-52 bombers start showing up in South Korea?

Earlier this week, trigger-happy Kim pushed his luck once more when he fired off four ballistic missiles into the seas near Japan.

Now US military chiefs are reportedly planning to fly in B-1 and B-52 bombers – built to carry nuclear bombs – to show America has had enough.

South Korea and the US have also started their annual Foal Eagle military exercise sending a strong warning to North Korea over its actions.

A military official said 300,000 South Korean troops and 15,000 US personnel are taking part in the operation.

The Trump administration has openly stated that all options “are on the table” when it comes to North Korea, and that includes a military strike.

It has been more than 60 years since the Korean War ended, but many are concerned that we may be closer to a new Korean War than we have been at any point since that time.

And of course our relationship with China is tumbling precariously downhill as well.  Another reason why the Chinese are extremely upset with the Trump administration is because a U.S. Navy carrier battle group led by the USS Carl Vinson sailed past islands that China claims in the South China Sea just a few weeks ago.

In China, the media openly talks about the possibility of war with the United States over the South China Sea.  Most Americans are not even aware that the South China Sea is a very serious international issue, but over in China this is a major focus.

And the U.S. military has recently made several other moves in the region that have angered the Chinese

Also in February, the U.S. sent a dozen F-22 Raptor stealth fighters to Tindal AB in northern Australia, the closest Australian military airbase to China, for coalition training and exercises. It’s the first deployment of that many F-22s in the Pacific.

And if that didn’t get the attention of the Chinese government, the U.S. just tested four Trident II submarine-launched ballistic missiles during a nuclear war exercise, sending the simulated weapons 4,200 miles from the coast of California into the mid-Pacific. It’s the first time in three years the U.S. has conducted tests in the Pacific, and the first four-missile salvo since the end of the Cold War.

I can understand the need to look tough, but eventually somebody is going to go too far.

If you are familiar with my work, then you know that I believe that war is coming.  Things in the Middle East continue to escalate, and it is only a matter of time before a great war erupts between Israel and her neighbors.  Meanwhile, U.S. relations with both Russia and China continue to deteriorate, and this is something that I have been warning about for a very long time.

We should hope for peace, but we should also not be blind to the signs of war that are starting to emerge all over the planet.  Relatively few people anticipated the outbreak of World War I and World War II in advance, and I have a feeling that the same thing will be true for World War III.

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